The 1st Respondent, Dr. Manoj Saha, claimed to be a tenant of a property located at 1 Allenby Road, Kolkata, under an unregistered lease agreement from 1987 with M/s Janapriya Finance (the original owner). The property was later sold to the 2nd Respondent, who mortgaged it to the Appellant (PNB Housing Finance Ltd.) to secure loans. Due to default in loan repayments, the account became a Non-Performing Asset. SARFAESI proceedings were initiated, and symbolic possession was taken on 02.12.2021. On 02.08.2023, physical possession of the asset was taken by the Appellant with the help of the District Magistrate. Respondent No. 1 then filed a securitization application before the DRT and also sought interim relief. The DRT denied interim relief, citing a lack of registered tenancy and no prior notice to the lender about tenancy. The High Court, however, allowed Respondent No.1’s plea under Article 227 and directed restoration of possession. The issues for Consideration before the Apex Court were;

1. Whether the High Court was justified in entertaining a writ petition under Article 227 despite the existence of an alternate remedy under Section 18 of SARFAESI?
2. Whether the 1st Respondent entitled to restoration of possession based on his claim of tenancy?
3. What is the legal effect of tenancy created by unregistered agreements under SARFAESI, especially post the 2016 amendment introducing Section 17(4A)?

The Supreme Court held that the High Court erred in entertaining the writ petition, especially when an adequate appellate remedy was available under Section 18 of SARFAESI. The High Court wrongly relied on the Harshad Govardhan Sondagar precedent, which had become obsolete post the 2016 amendment to SARFAESI. The Court emphasised that oral or unregistered tenancy agreements cannot survive beyond one year from the date of notice under Section 13(2) of SARFAESI unless supported by convincing evidence (like rent receipts, electricity bills, etc.). In this case, Respondent No.1 failed to prove tenancy through reliable evidence prior to the issuance of notice. Payments to the Rent Controller started only in 2022, after proceedings had begun. The Court also noted the passive conduct of Respondent No.1, who did not act despite multiple public notices.

The  Honourable Court  relied on various judgments:

1. Bajarang Shyamsunder Agarwal v. Central Bank of India, (2019) 9 SCC 94, clarified that tenants claiming under an unregistered or oral tenancy must establish their status through independent documentary evidence. Even then, such tenancies cannot survive beyond one year from the date of the SARFAESI demand notice, after which the occupant becomes a “tenant in sufferance”.
2. Harshad Govardhan Sondagar v. International Assets Reconstruction Co. Ltd., (2014) 6 SCC 1, which had previously protected tenants under registered leases from SARFAESI eviction, was rendered inapplicable post the 2016 amendment to the Act, which introduced Section 17(4A), allowing tenants to approach the DRT.

• Varimadugu Obi Reddy v. B. Sreenivasulu, (2023) 2 SCC 168 and

1. South Indian Bank Ltd. v. Naveen Mathew Philip, (2023) 17 SCC 311,
   that High Courts must refrain from interfering in SARFAESI proceedings under Article 226/227 when alternative remedies like appeals under Section 18 are available.

In light of the above, the Court concluded that the Respondent’s failure to prove tenancy before the mortgage or to produce contemporaneous evidence invalidated his claim, and no direction restoring possession could be granted.

The Supreme Court allowed the appeal and set aside the High Court’s order restoring possession. Directed that the status quo be maintained in respect of the secured asset until disposal of the securitisation application pending before the DRT, which must be concluded within 2 months.( SLP ( c ) No 7288 of 2024   dt. 15 -7 -2025 )